This op-ed is a part of a sequence exploring what a second time period would appear to be for both President Biden or former President Trump.
President Joe Biden, if reelected, would face an economic system at a crossroads. Larger rates of interest and step by step deteriorating family funds will check shoppers’ resilience. Ongoing conflicts in Europe and the Center East will threaten oil value stability. Rising federal curiosity funds and ubiquitous turmoil in Congress will endanger buyers’ urge for food for Treasury debt. Whereas these challenges would form Biden’s second time period, the sitting president — relying on the get together composition in Congress — can also have the prospect to construct on the legislative wins achieved throughout his first two years in workplace.
The Construct Again Higher Act, which handed the Home in October 2021 and fell one vote quick within the Senate, gives an in depth roadmap to his unfinished agenda. When Construct Again Higher stumbled in Congress, Democratic leaders repackaged the local weather provisions and choose income raisers into the Inflation Discount Act and shortly ushered the invoice by way of each homes. The remaining elements of Biden’s financial agenda relate to the care economic system, together with main expansions in social applications and tax will increase on greater earners designed to pay for the extra outlays.
Among the many yet-to-be legislated elements of the Construct Again Higher agenda, maybe probably the most complete reforms influence well being care. The measure would supply extra beneficiant premium tax credit to make medical health insurance extra reasonably priced for 9 million Individuals, broaden Medicaid protection to 4 million uncovered adults and guarantee high-quality home-based care is an possibility for older Individuals and other people with disabilities.
Sources for youngster care would even be overhauled and expanded. Preschool could be common for each three- and four-year previous within the nation, youngster care bills could be capped at 7 p.c of revenue for nearly all households, extra working dad and mom would have entry to youngster care at their place of business and paid household and medical depart could be universally out there.
These investments in care could be offset by a sweeping overhaul of the tax code, beginning with modifications to the taxation of multinational firms, closing a loophole on payroll taxes for upper-income earners and instituting a surtax on taxpayers with over $10 million in revenue. Expanded IRS enforcement, at all times a political soccer, would even be on the desk. On the similar time, expansions within the Youngster Tax Credit score and Earned Revenue Tax Credit score would collectively drive down poverty charges and strengthen family funds for lower-income households.
The Act’s viability in a second time period could be decided by the composition of Congress. Realistically, Biden’s agenda might be dead-on-arrival with no Democratic Home and a minimum of a 51 or 52 vote majority within the Senate. Ought to Democrats fall quick in both chamber, Biden’s second-term tenure will almost certainly resemble that of his predecessor President Barack Obama. Particularly, Biden will grapple with the acquainted challenges of an expiring Republican tax lower and a quickly evolving commerce panorama.
Simply as Obama in early 2013 negotiated the expiration of tax cuts put in place below President George W. Bush, Biden in 2025 must confront the scheduled expiration of the Tax Cuts and Jobs Act legislated below President Donald Trump. (Trump’s tax regulation made everlasting a steep lower within the company tax fee, offset by greater taxes for each particular person taxpayer as a result of a change in methods tax parameters develop with inflation.) The distinction, nevertheless, is that the fiscal outlook is considerably worse: Debt was roughly 70 p.c of GDP when Obama was negotiating in late 2012; Biden will negotiate with a debt stage that’s about 50 p.c greater as a share of the economic system. This fiscal stress could imply that Biden received’t have the identical luxurious afforded Obama and congressional Republicans after they agreed to a everlasting deficit-financed tax lower. Failure to increase the tax cuts means swapping short-term financial headwinds for a extra sustainable long-term fiscal outlook.
A second Biden time period, like Obama’s, will face troublesome decisions on commerce coverage. Whereas Obama’s presidency featured a concerted — however in the end doomed — effort to move the sweeping Trans-Pacific Partnership, Biden will as a substitute should resolve the extent to which he’ll depart from the protectionist insurance policies of his rapid predecessor, together with specifically the administration’s stance in the direction of commerce with China. Pursuing new commerce agreements in Indo-Pacific and Latin America will probably be a part of Biden’s commerce legacy as effectively.
There are urgent second-term questions that the Construct Again Higher agenda doesn’t tackle. One is whether or not Biden would tackle the scheduled exhaustion of the Social Safety and Medicare Belief Funds. Biden already laid down a marker throughout the 2020 marketing campaign: a Social Safety reform plan which might shut about one-quarter of the long-term imbalance and plus-up advantages for weak populations by elevating the cap on taxable earnings. Equally, his final price range superior a plan so as to add a minimum of 25 years to Medicare’s solvency by elevating payroll tax charges on rich earners and expediting prescription drug negotiations. In sensible phrases, Biden would want both (and maybe each) massive majorities in Congress and robust alerts from buyers in Treasuries to attain any measurable reform to main entitlements.
Three years into his presidency, President Biden has demonstrated a transparent sense of his high financial priorities: reinvigorate American manufacturing, speed up the clear power revolution, undertake pro-labor regulation, bolster U.S. infrastructure, and lift extra income from firms and upper-income taxpayers. With 4 extra years and a like-minded Congress, he’ll probably intention to move the laws that got here up one vote quick in his first time period and intention to dramatically overhaul America’s care economic system.
Benjamin Harris is the vp and director of financial research on the Brookings Establishment. He was a long-time financial adviser to Joe Biden and just lately served as assistant Treasury secretary for financial coverage.
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